Extendible Options

Extendible options allow the holder or writer to choose, on the expiry date, to extend the life of the option by a specified amount. There are two types of extendible options: holder-extendible and writer-extendible.

As the name implies, a holder-extendible option may be extended by the holder of the option. Generally, an additional premium must be paid by the holder upon exercising the right to extend.

For writer-extendible options, the option can be extended by the writer of the option. The writer does not pay the holder any extra amount in order to extend the option. Note that the option will be extended only if it is out of the money, as there is little point in extending the option if it is already in the money.